Many people who enter the market for their first car can be overwhelmed by the countless financing options available. While almost every car buyer can apply for a vehicle loan, not everyone has the same credit history. In light of the ongoing economic troubles across the country, car buyers are finding it more difficult to secure funding for a brand-new car. Blacklisted or under-debt-review consumers are especially drawing the short straw when it comes to loan approval.
Access to the latest car models. This is the biggest lure of rent-to-own schemes. Car Insurance, roadside assistance and a tracking system are often part of the deal. Dealers also promote second-hand cars with high number of miles on it which could otherwise be sold at auction. They sell these vehicles for at least a 100% mark-up, usually twice the auction price, and calculate the rental price on this markup.
The advantage of rent-to-own cars is that they come with better approval odds. These applicants are usually not subjected to a credit check. They need only submit their identity document, payslip and proof of residence. This makes it easier to be accepted for a deal.
Buyers put down a deposit and then make payments on a weekly monthly basis. They rent the car for an agreed period, usually 24, 36, 48 or 60 months with an option to switch to a newer model after the term ends. While they’re in possession of the vehicle, they are responsible for maintenance and all running costs.
Before signing on the dotted line, you can make sure you are prepared with these eight steps
- Determine how much you’ll be paying for the vehicle in the end and compare it with the price of buying a vehicle directly from a dealer.
- What is included in the Car Insurance policy and what will you pay in excess? Will you receive third-party cover as well?
- Are you allowed to sign-up for a Car Insurance policy at your preferred insurance provider? Keep in mind that you may not get a reduced instalment if you switch.
- How old is the vehicle? If it has high mileage, does it include a maintenance plan?
- Who is responsible if the vehicle breaks down and must it be taken to their approved workshop?
- Will you be charged late payment fees? Can you ask for an extension or make arrangements to pay an instalment later?
- Are you able to repay early and, if so, does an early settlement penalty apply or will you receive a discount?
- Do you really need a new car now or is it something you want? Remember if it’s not an emergency, you can always save up to buy a car later.
It’s important that car buyers are informed about decisions regarding their personal finances. If the rent-to-own structure sounds like the quickest road to vehicle ownership, consumers are encouraged to take the time educating themselves about what they are committing to before buying a car.
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